Overview of the national laws of EU Member States
National corporate criminal liability law are not harmonised. The statutes put forth do not in any way ensure that the same offence charged in two different EU Member States will be similarly enforced. 1 In its Green Paper on the approximation, mutual recognition and enforcement of criminal sanctions in the european Union, the european Commission notes: “There are considerable differences between the Member States as regards sanctions for legal persons.” 2 In order to ensure fair competition between companies domiciled in the EU Member States, it would be better if they harmonised their rules governing corporate criminal liability in order to guarantee fair competition between EU-based companies. 3
Where appropriate, national laws have opted for a system of either: (a) generality or specificity, (b) strict liability or vicarious liability, (c) a disposition toward holding either individuals or corporations liable or (d) a disposition towards holding both parties liable to either a full or limited extent. In terms of penalties, each State enjoys complete freedom in selecting specific penalties for legal persons found guilty. Procedural issues raise several delicate questions. Before addressing these issues, the first question is whether the company in question is a legal person which may be held criminally liable.
Is the company in question a legal person?
In Belgium, as in other States, the law establishing corporate criminal liability, creates a sort of “custom criminal legal personhood” for companies not yet covered under civil legislation (e.g. commercial companies in the process of incorporating). 5 The Belgian criminal code applies to private entities which exist in reality and are carrying out specific operations. The Belgian criminal code lists the companies considered as legal persons and defines the conditions for criminal liability of a legal person. 6 The law applies primarily to economic entities which function despite a lack of legal personhood in the strict sense. 7
In France it is possible for criminal courts to recognize the legal personality of a group for the sole purpose of imposing a criminal penalty. 8 The Criminal code determines the legal regime applicable to legal persons in criminal matters. It specifies the legal persons liable, the conditions relating to criminal liability, the penalties incurred and the existing rules of procedure. Legal persons shall be criminally liable for offences committed, on their behalf, by their organs or representatives.
The United Kingdom also does not require abstract entities to hold legal personhood in the strict sense for them to be considered criminally liable. 9
Portugal: The principle was introduced in the Criminal Code of 1982 by the Law 59/2007 which modified and extended the scope of article 11 of the code. These provisions regulate the conditions for the criminal liability of legal persons and representatives.
Luxembourg: The law of 3 March, 2010, which introduced several articles on the penal code and the code of criminal procedure, attaches the responsibility of legal entities to the existence of a legal personality. 10 A legal person shall be subject to criminal sanctions where an offence is committed on behalf of and in the interest of the legal person, or where a failure to supervise or control by a representative has made possible the commission of an offence in the interest of the legal person.
Spain: The reform to the Criminal Code, approved by the Senate on 9 June 2010, introduced corporate criminal liability for the first time through article 31bis of the Code. This article was recently modified by the Organic Law 1/2015 of 30 March, 2015.
The Spanish Supreme Court in its ruling 154/2016, dated 29 February 2016, assessed for the first time corporate criminal liability on the basis of article 31bis of the criminal code. The ruling specified the conditions that must be met for this article to be applicable : (1) the crime must have been committed by an individual within the company concerned, and (2) the company must have failed to establish measures to monitor and supervise its personnel in order to prevent such crimes from being committed, thereby making possible or facilitating the Commission of the crime. 11
Corporate criminal liability is also a matter of discussion in the context of mergers and acquisitions. The question arises whether, in the event of a dissolution of a company, the acquired company is exempt from liability for acts carried out prior to the merger, and whether the acquiring company also escapes liability due to the prohibition on vicarious liability under criminal law. 12 In some states the resulting impunity is the same if several companies form a new company by transferring their assets to the latter. 13
However, the Court of Justice of the European Union ruled that a merger entails the transmission to the acquiring company of the obligation to pay a fine for infringements committed by the acquired company before the merger 14 . Recently, the French Supreme Court (“Cour de cassation”) overturned its case law, ruling that companies may now be held criminally liable for offences committed by the acquired company prior to the merger by acquisition 15 . This case makes companies more accountable, as they can no longer escape criminal prosecution by carrying out mergers or acquisitions.
The principles of generality and specificity
Some States (including Belgium, France and the Netherlands) have opted for the generality principle under which corporations and individuals are subject to all national criminal codes and additional laws and decrees. 16 Others prefer the principle of specificity (including Portugal, estonia, Finland and Denmark 17 ) which allow legal persons to be charged only for those offences expressly enumerated in the national criminal code (and/or additional laws or decrees).
In 1994, the French legislator implemented a principle of specificity, according to which a legal person could only be criminally liable in the cases provided for by law or regulation. This created a limit on the offences that could be imputed to a legal person. However, ten years after, the Law of 9 March 2004 abolished the principle of specificity as of 31 December 2005. Henceforth, according to the generality principle, legal persons are automatically liable for all offences, unless a provision expressly excludes this liability. 18
The material element (actus reus) of corporate liability
To establish a corporation’s material liability for an offence (in other words, to hold legal persons liable for committing an act which is defined and punishable under law), it must be established that the violation was committed in the course of the company’s operations and on its behalf. This principle is present in both international and regional instruments and in national legislation. 19 It aims to avoid holding companies strictly liable for crimes committed by individuals who abuse the company’s legal or material framework in order to commit offences to their own personal benefit. Companies can be held liable in one way or another for acts committed to secure an advantage or to avoid an inconvenience. 20 The question must be asked whether this condition may be satisfied not only by defending one’s economic interests, but also by pursuing a moral interest. 21
A company’s profit or savings deriving from an offence is a key criterion of liability. Similarly, offences committed in a company’s financial or economic interest or in order to ensure its operations create liability even if no profit is earned. As mentioned above, as the plaintiffs in Belgium argued in 2002, regardless of the financial benefits, Total and its subsidiary TMeP reaped by operating the Yadana gas pipeline in Myanmar, the companies benefited from their complicity in gross human rights violations perpetrated by partners the company contracted to provide security for the pipeline 22 .
In Belgium, material liability (the material link between the facts and the legal person) depends not on the nature of the person who commits an offence (parent company or subsidiary, legal person or individual), but exclusively on the characteristics of the act 23 . Belgian law is closer to section 51 of the Dutch Penal Code, which states in clear terms that punishable offences can be committed by individuals or legal persons. In this sense, the company may be held liable for the actions not only of managers, but of subordinate employees (or the sum of the acts of several individuals) as well.
Some States, however, have provided an exhaustive list of persons who can render a company materially liable.
In France, for example, Article 121-2 of the Criminal Code specifies that only offences committed on behalf of a company by individuals categorised as organs 24 or representatives 25 of a company can render a company criminally liable.
Most States, however, have opted for a blend of these two models.
The moral element (mens rea) of corporate liability
Strict liability and vicarious liability
The general legal principle that criminal liability is established only when the material and moral elements intersect applies naturally to legal persons. In criminal law, there can be no liability without intent. A corporation is therefore a social reality which can exercise true and autonomous will, distinct from the sum of the individual intentions of its directors, representatives and agents.
In practice, however, courts evaluate a company’s intentions through the attitudes of individuals working within the company.
Contrary to French law (vicarious liability 26 ) and english law, 27 the law in Belgium and the Netherlands does not identify which individuals can render a company criminally liable through “omission or Commission” and the question is left to the court’s discretion. One may deduce that with each fault by an employee the company’s mens rea (intention) and criminal liability increase. The explanatory memorandum to the Belgian law notes that in order to establish the intent of a legal person, the court must rely on the conduct of individuals in leadership positions. 28 Belgium’s Senate Justice Commission further noted, but does not require, that the most common and revealing (though not exclusive) criteria establishing intent are found in the decisions and attitudes of the directors. 29
While the act and intent components of any offence are by nature closely related in cases involving the criminal liability of individuals, the two components may stem from different individuals in cases involving corporate criminal liability. It is quite common for a company’s “knowledge” and “will” to be compartmentalised in different business entities. With regards to a particular translation, the sum of the “knowledge” and “will” components within a company result in what is called collective knowledge doctrine. 30
Encart Complaints filed in France against Lafarge (continued):
In the Lafarge case discussed above, the Paris Court of Appeal rejected the accusation of complicity in crimes against humanity. In order to characterise complicity in crimes against humanity, it is necessary to demonstrate the existence of one of the specific act listed in Article 212-1 of the French Criminal Code. According to the reports of the International Independent Commission on the Syrian Arab Republic established by the UN Human Rights Council, there were serious and consistent indications of the commission of such crimes. However, the Examining Chamber did not retain the charge of complicity in a crime against humanity. The Chamber added a criterion that does not exist either in jurisprudence or in the terms of article 121-7 of the Criminal Code: that of having the will to associate or assist in the commission of the criminal offence. As the law stands, the accomplice must only be aware that he or she is participating in the main offence and that the offence was being committed at the time of his or her intervention. The Chamber therefore adds a criterion by stating that Lafarge should have had the will to participate in these crimes in order for the act of complicity to be characterized as an act of complicity.
Among the different options available, the preferable solution may be the possibility for the actus reus (the material act) to emanate from a director or agent, whereas the mens rea (intent to commit a crime) could be established in one or more individuals who share the role of “director”. 31 For the purposes of this chapter, “director” shall be defined as any person who has de facto power to make decisions which result in the company taking action, provided the individual has made the decisions in the course of his or her duties and within the limits of his or her powers. 32 This refers to “ de facto directors”, those who were the “company incarnate” at the time of the offence. 33 Decision-making is generally an organic process, and decisions are often taken with the support of colleagues and with a diffusion of will so divided that it is difficult to attribute a decision to particular individuals. Qualitatively speaking, an expressed desire belongs more to the company than to the group of individuals. In other words, the expressed desire of the company is fundamentally distinct from that of each of its members.
The principle of joint liability
Establishing a company’s criminal liability does not mean that individuals (physical persons) who allegedly commit an offence on behalf of a company will receive impunity. The Council of Europe Recommendation No. R (88) 18 promotes the principle of joint liability of individuals and legal persons 34 . The new section 12.1 of the Corpus Juris 2000 also provides that “If one of the offences described herein (Articles 1 to 8) is committed for the benefit of a business by someone acting under the authority of another person who is the head of the business, or who controls it or exercises the power to make decisions within it, that other person is also criminally liable if he knowingly allowed the offence to be committed […]” 35 One of the most interesting lessons in comparing the laws of EU Member States is that the number of rules in common targeting intentional offences is significantly greater than those targeting unintentional offences. 36 This guide is primarily concerned with unintentional offences given that the moral element is often difficult to ascertain or even absent in cases of corporate violations.
Yet, it remains a recommendation only and does not mean that the concept of joint liability is harmonised within the national legislation of the EU Member States.
In the United Kingdom, individuals are criminally prosecuted. The company’s joint liability is not mandatory.
In France, under Article 121-2 Section 3 of the Criminal Code, the criminal liability of corporations does not preclude that of individual perpetrators of or accomplices to offences. In the case of unintentional violations, the separation of liability is not mandatory. 37
In the Netherlands, joint liability is expected, but not mandatory. 38
In Belgium, as enumerated in Article 7bis of the Criminal Code, penalties may include a fine, special confiscation, dissolution of the corporation (only when the corporation was created to provide a vehicle to commit certain offences), a temporary or permanent ban on certain activities or a temporary or permanent closure of one or several of the corporation’s offices, branches or other establishments.
In France, fines are applicable in all cases in which offences are committed. Other penalties, noted in Article 131-39 of the French Criminal Code, such as the company’s disbarment from public procurement, apply only in cases expressly provided for by law. 39 The dissolution of a company may be imposed for the most serious offences, including crimes and offences against persons, crimes against humanity or if working or housing conditions do not meet basic standards of human dignity. A conviction for crimes against humanity will result in the confiscation of all assets. Recently, French law has introduced with the Sapin II Act a new sanction for specific offences. When it is provided for by law, the company can be obliged to abide, under the supervision of the French Anti-corruption Agency and for a maximum period of five years, to a compliance program designed to ensure the existence and implementation within the company of detailed measures and procedures. In this case, the company will be submitted to judicial supervision, ensuring that the company implements the necessary measures to prevent certain offences, such as corruption or influence peddling 40 .
The common feature among penalties is an affront to the group’s business operations, or even its assets. One should not ignore the direct effect penalties may have on employment following a temporary closure or a financial penalty so significant it would require the company to restructure itself. This consideration creates a de facto undesirable collective liability. Beyond this aspect, the company incurs reputational damage when it is accused of an offence, which can have important effects on the continuation of its activity.
States may not always find it practical to enforce penalties against foreign companies. How should one enforce a sentence issued by Belgian courts against the French company Total for complicity in crimes committed in Burma? Fines may be executed by drawing from the company’s assets in Belgium. Specific penalties such as dissolution and closure could be enforced on Belgian soil by targeting operational headquarters or company activities in Belgium (but being careful not to enforce the penalty against a distinct legal person). Because the foreign company, by nature, cannot be extradited, the effect of the penalties is limited to the company’s assets on Belgian soil. 41 To do otherwise would undermine the sovereignty of the State in which the parent company is incorporated.
If, however, the enforcement of a penalty against a foreign company in one State appears to be unlikely or impossible due to a lack of assets on the soil of the forum court’s State, it is still possible to report the facts to the State where the company is headquartered. 42 That State could act under active personality jurisdiction (see below) given the nationality of the perpetrator.
In sum, the challenges for victims are daunting. In order to identify the most appropriate jurisdiction (that which is least open to challenge under international law) victims must first determine whether a corporation or individual director or a representative at the parent company may be held criminally liable in a particular forum court. Victims must also establish the nationality of the alleged perpetrators in order to argue the principle of active personality. At the same time, the forum court’s legislation in concert with various extraterritorial principles will determine whether the accused legal person may be held criminally liable.